Download A Complete Model of the Supermarket Business

BPTrends ▪ January 2012
A Complete Model of the Supermarket Business
A Complete Model of the Supermarket Business
Frank Steeneken and Dave Ackley
Introduction
This Article provides a complete picture of the underlying skeletal structure that holds every
supermarket business together while achieving its goals. The supermarket model introduces a
comprehensive framework for managing the complexity of a supermarket structure, and a
reusable blueprint for visualizing how a supermarket company actually does business.
The model’s clearly-defined core-processes and their functions provide a powerful baseline for
improving business performance. By viewing a supermarket business as a single functional
system, the nature of its underlying core processes becomes clear. Then by managing and
improving them as parts of a single system, substantial improvements can be made on critical
success factors, such as lead-time requirements and the precise availability of stock when
needed, throughout the supply chain.
The method used to develop this Supermarket Model is a collaborative adaptation of an earlier
technique called “Integrated Modeling Method.” That method showed how every business
enterprise has the same inherent system structure. This new supermarket model incorporates
basic elements of that method, with major improvements and a much clearer understanding of
how a supermarket business operates in today’s world-wide market environment.
Scope and Focus of the Supermarket Model
A supermarket business enterprise is a large, very complex structure, involving many component
entities:
• An array of repeat customers grouped in various local areas.
• A chain of retail stores.
• Various transportation systems.
• A set of warehouse distribution centers.
• An array of product suppliers under contract.
A supermarket exists in a competitive environment, where it acts as a value-added intermediary
between geographically dispersed supplier companies and the scattered individual customers
who eventually buy their products.
In carrying out its function, a supermarket business acquires and assembles a wide assortment of
goods from individual suppliers, then organizes and distributes them as-needed to a chain of
retail stores for sale to local customers.
The supermarket model focuses on the work that is involved in physically handling stock as it
makes the journey from supplier to customer. Although it references the business entities that
are involved, the model does not include the life cycle development of the physical housing
structures of warehouses, stores and trucks, or the equipment they employ.
The model identifies key parameters that are involved, but this generic version does not include
specifics, such as the actual number of product types that a store carries, number of stores and
warehouses, their sizes, etc. These are determined when the model is applied to a specific
supermarket business.
Copyright © 2012 Frank Steeneken and Dave Ackley
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BPTrends ▪ January 2012
A Complete Model of the Supermarket Business
What is a Business Enterprise?
As shown in Figure 1, a typical business enterprise exists in a competitive marketplace, where it
acquires resources from its supplier market, adds value by transforming them into products or
services, and sells the results to its customer Market.
Figure 1: Business Enterprise
What is a Supermarket?
A supermarket is a business enterprise that provides a service. It does not produce a physical
product of its own in the usual sense. Instead, it adds value by acquiring existing products from
remotely-located suppliers, assembling them in regional warehouses, distributing them to local
stores, and finally selling the supplier’s products to local customers. Figure 2 shows the general
flow of stock from suppliers, through the supermarket business to local customers.
Figure 2: Supermarket Business
A supermarket’s customers are primarily local residents and small businesses that periodically
need to replenish their stock of household products. A supermarket’s suppliers are primarily
producers of household products that are established far from the locations of their final
customers. In effect, the supermarket provides a virtual marketplace that brings remote suppliers
together with local customers. Given this arrangement, the supermarket “product” is its supply
chain.
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A Complete Model of the Supermarket Business
How is the Supermarket Model Structured?
The model portrays a supermarket as a functional system for doing business. As a system, the
sequence of work performed in bringing products from remote suppliers to local customers
involves certain discrete business entities. Each of these entities provides a critical link in the
supermarket supply chain. Figure 3 identifies these business entities as subsystem layers of the
model, and defines the functional activities they perform.
Figure 3: Functional Activities
This sequence of business entities provides an initial breakdown to define the structure of
supermarket subsystem layers. To complete the overall structure of the supermarket model, the
structure of subsystem layers is overlaid with a sequence of four core processes, which represent
the life-cycle of a supermarket business. Figure 4 shows the four core processes in a time
sequence, overlaid on the previously-described subsystem layers.
Figure 4: Core Processes
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BPTrends ▪ January 2012
A Complete Model of the Supermarket Business
The core process sequence begins by defining the business concept in terms of a detailed set of
system requirements. This definition of requirements is then transformed into a tangible design,
followed by constructing of the structures, procedures and contractual agreements that make up
the business. The final core process shows how the resulting structures are employed to
provision the actual supermarket service. To fulfill the original business concept, the four core
processes are implemented over time. This four-stage development sequence comprises the lifecycle of the supermarket’s business enterprise product.
Developing Details of the Supermarket Model Structure
A more detailed subsystem structure is required as a basis for defining the core process
structures. The first task is to translate the Functional Activities to be Performed (from Figure 3)
into the sequence of Basic Functional Steps that bring product stock from remote suppliers to
local customers. As shown in Figure 5, these steps describe the essential supply chain of the
supermarket business.
Figure 5: Supply Chain
As the blue Basic Functional Steps column shows, the physical properties of the supplier Stock
remain unchanged throughout the sequence of subprocess steps. The Stock goes through a
sequence of actions that affect only its assigned properties, such as its location, accessibility,
visibility, and purchase price.
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BPTrends ▪ January 2012
A Complete Model of the Supermarket Business
The next task is to interpret the Basic Functional Steps as business subsystems, which portray
the supply chain in terms of business structural requirements. In Figure 6, the terminology shifts
from action steps to the state of supplier stock at each subsystem level. For each step in the
supply chain, this indicates which business entity owns or is responsible for the stock, its physical
location, and how it is being accessed.
Figure 6: Subsystems
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A Complete Model of the Supermarket Business
The more detailed subsystem structure of Figure 6 provides the foundation needed to identify
details of the four core processes and how they are to be performed. By directly connecting the
Basic Functional Steps to the structure of subsystem layers, it forces the breakdown of core
process work to coincide with the basic functional steps of the supply chain.
When the detailed subsystems and core processes are combined, they produce a grid-like
framework. Within this framework, each subsystem/core process intersection is interpreted as a
Business Function to be managed and performed. In terms of work to be performed, the resulting
array of subsystem/core process intersections displays the entire set of business functions of the
supermarket business enterprise.
Using this subsystem structure, each of the four core processes will be added sequentially to the
subsystem structure to create a diagram of the supermarket model. As each core process is
added, a description is provided to show how each of the new business functions is to be
performed. Figure 7 illustrates how the business functions are to be identified and described:
Figure 7: Business Function
In the Supermarket Model diagrams that follow, the first three core processes (Defining,
Designing, and Constructing) show downward arrows between their functions. This is to indicate
that work to develop the supermarket business concept is essentially customer-market driven.
The fourth core process (Provisioning) shows upward arrows to portray the flow of stock from
supplier to customer.
The purpose of this supermarket model is to clearly portray how the work performed in a
supermarket business is structured, apart from the way it is managed and controlled. To provide
this clarity, feedback loops and control systems are not shown on these diagrams.
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A Complete Model of the Supermarket Business
Implementing the Defining Core Process
Figure 8 provides a breakdown of the Defining Core Process into business functions that match
the supply chain sequence of functional steps from Figure 7. Each business function is defined in
terms of its requirements. Collectively, this column of descriptions defines the original business
concept as a requirements specification for what is to be designed, constructed and provisioned.
Figure 8: Defining Core Process
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A Complete Model of the Supermarket Business
Implementing the Designing Core Process
In Figure 9, the previously-defined requirements specifications are translated into a
comprehensive structural design framework that can be constructed and provisioned. The
horizontal arrows between subsystem functions indicate their sequence in time.
Figure 9: Designing Core Process
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A Complete Model of the Supermarket Business
Implementing the Constructing Core Process
Based on the previous Figure 9 comprehensive structural design framework, Figure 10 shows
how the individual subsystem units are constructed to carry out their role within the integrated
supplier-to-customer work-flow sequence.
Figure 10: Constructing Core Process
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A Complete Model of the Supermarket Business
Implementing the Provisioning Core Process
Once constructed, the original Business Concept can be put into action by provisioning the
supplier stock as needed to fulfill the customer-driven store shelf-stock requirements. Note that
In Figure 11 the arrows between the provisioning business functions proceed upward. This is
because the provisioning core process column portrays the physical flow of stock, from suppliers
to customers.
Figure 11: Provisioning Core Process
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A Complete Model of the Supermarket Business
The Addition of a Supporting Core Process
The four core processes (defining, designing, constructing, and provisioning) embody the basic
product life-cycle of a supermarket business. Figure 12 shows how a partial fifth core process is
added to portray how each store fulfills its purchase-warranty obligations to its customers.
Most customer returns of purchased stock are accommodated at the store by replacing the
returned stock with a new item from existing store stock. In practice, stores often order a small
quantity of additional store-stock to cover stock returns and stock-theft. In rare cases, where
extra store stock is not available (e.g., shortages or very large stock items), the supporting
transaction will be delayed until the new stock-item arrives at the store.
Figure 12: Supporting Core Process
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BPTrends ▪ January 2012
A Complete Model of the Supermarket Business
Application of the Supermarket Model
The supermarket model can be applied to all types and sizes of supermarket businesses. The
model is intended to be used as a standardized template from which the unique characteristics of
a specific supermarket business can be clearly identified.
The unique features of different types of supermarkets may vary, depending on size, location and
stock assortment. Further, differences in core process structure may vary with a given
supermarket, depending on product size, whether perishable, and supplier location.
All of these differences can be viewed as variations on the common underlying theme presented
in the supermarket model. This allows the standardized supermarket model to be employed as a
baseline template for understanding and defining all supermarket situations.
Example 1: The supply chain of a supermarket that acquires much of its stock from outside its
own country might have additional steps in its supply chain for greater bulk shipping, customs
receiving, and bulk warehouse storage.
Example 2: The supply chain of a supermarket that acquires perishable stock to be delivered
directly to its stores by local suppliers might eliminate the warehouse subsystem layers for that
portion of its business.
Supermarket Business Functions
Each intersection of a subsystem with a core process forms an essential business function.
These business functions define the business capabilities and actions that are required to satisfy
the original business concept.
Each business function embodies characteristics of both a core process and a subsystem. The
core process dimension breaks down into a set of sub-processes that defines the sequence of
work steps to be conducted in this portion of the supply chain. The subsystem dimension defines
how resources and schedules are applied to accomplish that work.
Business Function Decomposition
The overall sequential flow of work performed by each core process determines the flow of work
as it encounters its sequence of business functions. In that context, the work performed by a
given business function is viewed as a sub-process of the overall core process, and details of the
work within the business function appear as lower-level activities within that sub-process.
The supermarket model provides a framework that clearly defines all business functions that are
essential to the company’s product life cycle and operation. Each of these well-defined business
functions can then be decomposed into lower levels of detail using well-established process
modeling methods and techniques.
How Business Functions Relate to Organization Charts
The supermarket model’s subsystem/core process matrix can be applied to help realign a
company’s organization structure with its inherent functional structure. This framework provides a
tool for reassigning management responsibilities toward the more clearly defined business
functions.
The business functions that are defined within the supermarket model’s structural framework can
be mapped to those found on the company’s organization chart, as indicated in Figure 13. A
company’s organization chart typically shows a hierarchy of lower level organization units whose
responsibilities have evolved over time. The supermarket model’s matrix can bring to light any
fragmentation of a function across multiple organization units, as well as ambiguous paths of
authority over essential functional work.
Copyright © 2012 Frank Steeneken and Dave Ackley
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BPTrends ▪ January 2012
A Complete Model of the Supermarket Business
Figure 13: Mapping Org Unit to Business Function
The supermarket model’s functional structure could be employed by ERP software providers,
whose current views are often based on business functions derived from an organization
structure. Providing them with a more accurate view of the inherent structure of a supermarket
business could make their solutions much more powerful.
Conclusion
The supermarket model defines the inherent system structure that is common to every
supermarket business.
It provides an architectural framework of function and workflow that can be applied to better
understand and improve a supermarket’s business performance.
By identifying the supermarket’s complete core process and function structure, this model
provides a highly efficient tool for more accurate business process identification, improvement
and design.
--------Authors
Frank Steeneken is a Business Process Architect working in the Netherlands. Frank has 27
years of experience in the field of business process management, requirements engineering and
system analysis. He has worked for consulting organizations across different industry verticals
and has extensive experience with supermarket process modeling. Frank holds a BS in civil
engineering. He can be reached at [email protected].
Dave Ackley is the founder of Ackley Associates, an Oregon consulting firm specializing in
advanced modeling methods. Through years of consulting with a wide variety of businesses, he
developed a template-based Integrated Modeling Method that greatly reduced enterprise model
development time and cost. Dave holds a BS in electrical engineering, an MBA, and a PhD in
business administration. He can be reached at [email protected].
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